Internet Sales Tax – A Wolf in Sheep’s Clothing

Your taxes are about to be raised; and guess who’s behind it. Here’s a clue – it’s not the Democrats. Despite all the talk about reducing the
size and scope of government during their campaigns, and railing against President Barack Obama’s proposed tax hikes, a number of Republican governors are advocating for a sales tax on Internet sales.

Last week, media outlets reported that several Republican governors are
pushing an Internet sales tax on purchases from popular online retailers, including Amazon and eBay, in effort to shore up their state budgets. This effort is being led by New Jersey Gov. Chris Christie, who is slated to deliver a prime-time address at the party’s national Convention in Tampa next month (probably not focusing on raising taxes).

This effort is not new. For years, money-hungry politicians have been pushing for an online sales tax to pad state coffers. But past efforts, including those I opposed during my tenure in the House from 1995 to
2003, proved unpopular and proponents were forced to back off. This time, however, supporters of the scheme claim an online sales tax is inevitable.

According to the Wall Street Journal, Gov. Christie says a new tax on Internet is “an important issue to all the nation’s governors. Sen. Lamar Alexander (R-TN), who is shepherding the charge in Congress, told the
Wall Street Journal an online sales tax “is going to happen – if not this year, then definitely by next year.”

Currently, states can only impose a sales tax on businesses actually within their borders. When a consumer purchases a product from an online retailer, no state sales tax is applied.

Republican governors, like Christie, are masking the tax plan as a move for “fairness” to retailers based in their states. They claim online retailers
have an “advantage” over traditional retailers because they manage to skirt sales taxes. According to this view, consumers can visit a local retailer, try out electronics or other products, but then purchase them at home online. The extent to which consumers actually engage in such actions just to save sales tax, is speculative; but that does not deter the tax advocates from repeating the claim.

Not surprisingly, online retailers – including Amazon -- traditionally have opposed proposals by states to impose online sales taxes. But with
Amazon now seeking to expand its on-the-ground footprint in order to shave costs and delivery times, the company is now willing to cut deals with states. And states are eager to play “Let’s Make a Deal.”